Signaling by Hedgehog (Hh) family members mediate local cell-cell communication that is essential for development and maintenance of many tissues and structures. Aberrant activation of Hh signaling underlies basal cell carcinoma, medulloblastoma, and may contribute to many other cancers. Transduction of the Hh signal is poorly understood. Smoothened (Smo), a member of the serpentine receptor family, is essential for activation of intracellular responses to Hh. Responses are transduced through a cyoplasmic complex including Costal (divergent kinesin), Fused (S/T kinase), and Ci (zinc finger transcription factor). Depending on the level of Hh input, the complex can hold Ci in the cytoplasm in a latent form (Ci155), allow Ci155 to enter the nucleus, promote transcriptional activation by Ci, or promote proteolytic processing of Ci to its transcriptional repressor form (CiR). We have recently shown that Smo binds the cytoplasmic regulatory complex to regulate its activity. This supports our model, derived from genetic analysis. The model suggests that Smo can adopt three distinct states depending on Hh levels (OFF, LOW, HIGH), that Smo directly contacts Costal and Fused, and that Smo dimers are necessary for HIGH signaling. The proposed experiments test and extend this model by 1) characterizing the Ci regulatory complex in the OFF, LOW, and HIGH states, 2) determining the role of Smo dimerization/oligomerization in signaling, and 3) using a variety of mutated forms of Smo with dominant effects on signaling by endogenous Smo to identify and further dissect the steps in signal transduction. These experiments investigate the structural and mechanistic basis for three distinct signaling states in response to different levels of Hh. They should identify the critical steps for transition between the three states of the Hh signal transduction pathway. Their successful completion would significantly advance our understanding of this fundamental signal transduction pathway and may pinpoint therapeutic targets for Hh-based pathologies. [unreadable] [unreadable] [unreadable]